The purchase of a credit management system by Carlyle Group last week is the latest sign private equity firms are using developments in technology to manage their businesses.

Carlyle’s US leveraged finance group said it has taken SunGard’s BancWare ERisk system to optimise its portfolio management and improve returns.

Brannan Johnston, vice-president of Carlyle’s leveraged finance team, said: “We wanted to employ best-practice risk and capital management tools that are used by BancWare’s banking customers but are not yet common practice among investment managers.”

He said the system would help further the goal of investing in assets with positive risk-adjusted value, which will ultimately be a benefit to investors.

Private equity funds are growing in value, number and complexity and Carlyle’s move is the latest example of a private equity house turning to systems to manage complex businesses.

Solutions are emerging to meet this demand. SunGard’s is one of a handful that will meet the opportunities presented by private equity houses, according to a consultant to the sector.

Similarly, custody banks are eyeing the sector with a view to providing accounting services to private equity funds.

Catherine Doherty, a principal at buyside consultant Investit, said: “Typically, private equity managers buy and sell things relatively infrequently so it’s not hard for them to track investments but, for the largest private equity funds, it is becoming more of a challenge to manage their investments and returns to shareholders.”

Private equity funds have coped by using Microsoft Word documents or spreadsheets to manage investments and track payments to partners but are having to become better organised from a technological standpoint to manage greater complexity, she said.

“The largest groups running the largest funds will have several funds in play at any one time, which will run for between five and 12 years,” said Doherty. “There are huge stakes involved and private equity houses are becoming more complex to run. That private equity houses are starting to use systems is an indication of how the industry is changing.”

Investment managers and hedge funds have been through these growing pains, a natural consequence of the development of the business, Doherty said.

The transparency and accountability that technology provides is a pre-requisite to attract pension fund investment as institutional managers allocate more of their capital to private equity vehicles.

She said: “The increasing exposure of pension funds to private equity, both through direct investments and fund of funds, is driving the move to greater automation as investors want transparency. The pension funds want to get in there and the private equity houses want their money, which is only adding to the pressure on firms to prove they are managing money properly.”